3 Bars High Or Low Binary Options Trading Strategy
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When I started trading almost a decade ago, this was one of the first basic strategies I used—buy on new highs or take short positions buy puts on new lows.
It was incredibly simple and allowed me to establish my career as a trader. Therefore, in order to keep using the strategy I needed to find a way of determining how far, or for how long, the market was likely to run after making a new high or low.
The following method can help pick better option expiry times and determine how far a move is likely to go. 1 3 bars high or low binary options strategy preference is to always trade with the trend. Therefore, when the price of an asset is making new high after new high, I want to be going long calls and trading with the trend.
When the price is making new low after new low, I want to get short buy puts to capitalize on that trend. The strategy is to simply go long as the price creates a new high during an uptrend, or to get short buy puts as the price creates a new low during a downtrend.
Figure 1 shows this in motion for an uptrend. To use the strategy, simply draw horizontal lines extending out to the right based on recent highs. When the price passes through that line old high go long or buy calls. The problem though, is establishing how long the next move is going to last.
In figure 1 we can see the price move to a new high, and we can establish a position, but that is only part of the trade. We also need to know how long our trade should last. In other words, if trading binary options you will need to determine what expiry to choose for the trade which gives you the best chance of finishing in the money.
Pullback Extrapolationis a method used to determine the magnitude of the next move, but also approximately how long it will last. The technique is to measure the distance of the pullback prior to the breakout of a new high or low. If the breakout is to the upside new high add the distance of the pullback to the former high to get an estimate of how far the market may move. If the breakout is to downside new lowsubtract the distance of the pullback from the former low. Figure 2 shows an example of a move to a new high.
The yellow vertical line on the left shows the length of the pullback. I have duplicated that line and placed it above the new high to indicate where the move higher will potentially stop.
Instead of using the distance of the pullback, you can use time. In this case the pullback was 9 bars. I am only counting the bars that are moving counter-trend, or in this case, down. This method is shown in Figure 3. If you trade a breakout to a new high or low using binary options, use the number of periods in the pullback as the expiry, OR use one period. These expiries are likely to increase the odds of finishing in the money.
The one period expiry can also be used because it quite rare to have a breakout followed almost immediately by a reversal; usually at least one bar is in the money before the reversal. The periods are based on the chart time frame you 1 3 bars high or low binary options strategy, such as 1, 5, 15 minute or hourly charts.
If there is no significant pullback before the move to new high, the method is unlikely to be reliable. As in the examples, a pullback that is visible and measureable is preferred. A very brief pullback against the trend shows the trend is quite strong, and therefore the 1 3 bars high or low binary options strategy move is likely to be larger than the pullback. Therefore, if a pullback is only two or three bars, and then the trend resumes by making a new higher high or lower low the next move is likely to last more than two or three bars respectively.
No trading method is flawless. This method is simply used to provide an approximation of how long a move will last, or how far the move will travel. The buying new highs and selling new lows strategy is one of the simplest around, 1 3 bars high or low binary options strategy it can be profitable if the right exit or option expiry is chosen.
Use the pullback that occurs before a new high or low as a guide to how big and how long the next move will be. Then use this information to choose an expiry time or exit that works for that particular time frame and trade.
By trading with the trend you stand a greater chance of finishing in the money. Go through your charts and see how the method would have worked in the past, and get a feel for the strategy before risking real capital.
Determining 1 3 bars high or low binary options strategy Next Wave Pullback Extrapolationis a method used to determine the magnitude of the next move, but also approximately how long it will last.
While I have used hourly charts in the examples, the method works 1 3 bars high or low binary options strategy with all time frames. Final Word The buying new highs and selling new lows strategy is one of the simplest around, and it can be profitable if the right exit or option expiry is chosen.